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Mortgage Debt in Retirement

Seniors-Mortgages77% of baby boomers deem it “important” to pay off their mortgage by retirement, says TD. (Survey Link)

It’s good to see that number going in the right direction. RBC did a similar study in 2007 that found 66% of Canadians believe a free-and-clear home is important at retirement.

But many Canadian’s are not walking the talk:

  • TD says 54% of boomers have paid off less than half of their mortgage.
  • RBC says almost 1 in 4 retirees have a mortgage on their primary residence at retirement. (We fully expect this ratio to climb due to rising home costs and consumers’ growing debt-addiction.)

Carrying debt later in life could coincide with three other trends:

  • More income will be diverted to debt repayment instead of investments
  • Long-term stock market returns could be notably less than expected (see this and this)
  • Pensions will make up less and less of the typical retiree's income.

In turn, Canadians’ homes could increasingly be their primary source of survival at retirement. That, and a ballooning seniors population, means more retirees could start tapping their homes for liquidity.

This will be music to the ears of HomeQ, the parent of reverse mortgage provider CHIP.  CHIP has posted solid revenue growth for each of the last five years. Demographics and retirement savings trends will likely boost its sales further…for many years to come. 



Side note:  At $6.80 a share, HomeQ could be a stock to keep an eye on. CHIP originations through the broker channel exploded 198% in the last year. (This is not a stock recommendation, just an observation.)